All-Risks Coverage

What Is All-Risks Coverage?

All-risks coverage covers any incident that an insurance policy does not expressly exclude. All-risks coverage, also known as all-perils coverage, provides far more protection than named risks coverage. Named risks coverage only applies to incidents that are specifically mentioned in the policy.

However, the phrase "all-risks coverage" is a little misleading because all insurance policies have a slew of exclusions. As a result, most insurance policies avoid using this terminology when describing their policies. This type of insurance policy is more commonly described by insurers using terms such as "special perils coverage." In the case of "all-risks" coverage, it is usually the insurer's responsibility to demonstrate that the claim is not covered (rather than the insured's responsibility to demonstrate that the claim is covered).

How All-Risks Coverage Works

A personal liability umbrella insurance policy, which covers large-dollar claims and certain incidents that homeowners and automobile insurance do not, is a type of insurance that may be considered all-risks coverage. Personal liability umbrella policies, on the other hand, continue to exclude certain incidents, such as intentional damage, business liability, damage to your own property, and damage resulting from acts of war, among other exclusions. These policies cover everything else specified in the policy, including incidents involving personal liability.

In general, insurance companies provide two types of property coverage for homeowners and businesses: perils coverage and all-risks coverage. A policy that includes "all-risks coverage" will not cover any type of loss. Insurance policies are typically designed to cover specific situations and, as a result, will list a number of incidents that are not covered. Earthquake, war, government seizure or destruction, wear and tear, infestation, pollution, nuclear hazard, and market loss are the most common types of perils excluded from all-risks coverage.

However, if an individual or business requires coverage for an excluded event under an all risks coverage policy, they usually have the option of paying an additional premium, known as a rider or floater, to have the specific peril included in the contract.

It is critical for consumers to understand that having all-risks coverage does not imply that you can use your umbrella policy to cover gaps in your health insurance coverage; an umbrella policy will not cover your medical treatment.

All-Risks Coverage vs. Named Perils Insurance

A named perils insurance policy only covers the perils specified in the policy. An insurance contract, for example, may state that any home loss caused by fire or vandalism is covered. As a result, an insured individual or entity who suffers a loss or damage as a result of a flood cannot file a claim with their insurance provider (because a flood is not named as a peril under the insurance coverage). The insured bears the burden of proof under a named perils policy.